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Saturday, November 19, 2011

More green jobs...with even higher costs!

President Obama’s Green Energy agenda recently has been the subject of heated debate. By investing tens of billions of dollars into the renewable energy industry, the President intended to stimulate the economy by creating more job opportunities. Skeptics, including Daniel Indiviglio, believe that this scheme cannot deliver on its promises[1]. As he puts it, “the funding could poison the green energy movement in the long run”.

It is true that renewable energy generates positive externalities besides economic benefits, but the effect won’t have much of an effect in the short run, especially during the current economic downturn. Some would argue that the government should support renewable energy because it creates incentives for companies to advance clean energy technology and improves social welfare. It is reasonable for government to subsidize the renewable energy industry for the extra marginal social benefits. However, it takes a long time for the benefits to actualize. Since the country has not yet recovered from economic recession, firms are cutting costs and consumers are holding back. Investors tend to aim at short-term benefits rather than long-term gains. It is simply impossible to expect the industry to boom under the current economic downturn.

The Green Energy agenda involves the unrealistic goal of creating five million green jobs in ten years, unlikely since green jobs require highly skilled workers that necessitate large sums of inputs. It is calculated that one more “green job” requires an additional input of $2.7 million. Since early 2009, the government has set aside 500 million dollars to train workers for careers in energy efficiency and renewable energy fields, but the newly trained pool of workers remains inadequate for renewable energy enterprises.

Overall, the idea of “creating green jobs to stimulate economy” might not work because companies cannot gain profits from the renewable energy industry in the short-term. It is understandable that, during times when unemployment rate is as high as nearly 10 percent, framing the problem with “increasing more job opportunities” might gain support from the general public. Nevertheless, it doesn’t make sense when you start to think about the other side of the problem, where an incredibly large amount of money is needed for innovations of the renewable energy technology, recruiting and training workers to utilize the high-tech power plants, etc.

In his article, Daniel Indiviglio argues that government should back off and let private sectors handle the problems by themselves. I do not agree. The renewable energy industry is so fragile and unpredictable. Although it is tricky to handle renewable energy during economic recession, it would be worse to do nothing. I suggest that the government stop investing money directly in creating green job opportunities, and instead put more money in tax credits for the renewable energy. The key difference is the flexibility companies may have to adjust inputs of labor and infrastructure based on their capacity. After all, what truly helps is not desperately looking for “more green jobs”, but to assist renewable energy companies in realizing what they need.

1 comment:

Good blog!I recently analysed a business case "Esquel" that thrives by properly embedding the right social contributions into its own business strategy.I believe its success exemplifies a possibility that under appropriate guidance can both corporate values and social values be achieved together.Everything's in dichotomy. I think U.S.government should prioritize the incentives to inspire enterprises to initiatively unify social responsibilities with organization values. Only in this way can the seemingly conflicting social and corporate values converge and become mutually benificial.

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